RIL shocks street, buyback seen as cover for poor results

Reliance Industries (RIL) has posted a net profit of Rs 4440 crore, down 13.6% year-on-year on the back of lower refining and petchem margins. Sales, however grew 40.2% to Rs 87,480 crore.

While the company's gross refining margins declined to USD 6.8 per barrel from USD 9 per barrel and its petchem stood at 10.9% versus 11.5% year-on-year.

Meanwhile, shares of the index heavyweight company closed the day at Rs 793.35, up 1.04% before it announced its results,

Commenting on the results, Mukesh Ambani, chairman and managing director, RIL said, "The global nature of our businesses and weakness in economic conditions resulted in reduced earnings in the quarter, particularly in our refining and petrochemicals businesses. Notwithstanding these challenges, RIL has delivered reasonably robust results with high operating leverage. Our focus remains on enhancing shareholder value by leveraging an exceptionally strong balance sheet, operating top decile assets and investing prudently in future growth engines."

Simultaneously, the company's board approves share buyback of Rs 10,440 cr at maximum price upto Rs 870/sh which is at 10% premium to today's closing price. RIL will buyback up to 12 cr shares or 3.6% equity via open-market. Analysts see this move as a cover for disappointing results..

Analysts were highly disappointed by the results especially GRMs were much below estimates.

Here's a quick glance on segment wise performance of the company.

Gross refining margins came in at USD 6.8 per barrel, which is at all time low compared to Singapore refining margins of USD 7.3-7.4 per barrel. This is for the first time Reliance GRMs have fallen below Singapore GRMs. -Negative

There was a sigh of relief on revenues front, which came in at Rs 85,135 crore as against expectations of Rs 81,250 crore. -Positive

Petchem revenues fell by 6.1% to Rs 19,781 crore in the October-December quarter of FY12 versus Rs 21,066 crore in the previous quarter. -Negative

EBIT margins in refining too was very much disappointing at 2.2% as against 4.5% quarter-on-quarter. -Negative

Operating Profit Margins at 8.56% Vs 12.53%, a drop of 400 bps. -Negative

Depriciation down 13.4% at Rs 2570 Cr vs 2969 Cr. -Positive

Gas production at 136bcf vs 147 bcf for the quarter. -Negative

QoQ Performance

Petchem
Revenue at Rs 19781 Cr vs Rs 21066 Cr
Margins at 10.9% vs 11.5%

Refining
Revenue at Rs 76738 Cr vs Rs 68096 Cr
Margins at 2.19% vs 4.51%

Oil & Gas
Rev at Rs 2832 Cr vs Rs 3563 Cr
Margins at 45.7% vs 42.96%

Source: www.moneycontrol.com

Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd